Page 98 - Contributed Paper Session (CPS) - Volume 5

CPS1111 Jitendra Kumar et al.

Statistical impact of merger and acquisition in a
banking industry: A new generalized time series
model
Jitendra Kumar, Varun Agiwal
Department of Statistics, Central University of Rajasthan, Bandersindri, Ajmer, India

Abstract
Present paper proposes a new autoregressive time series model to study the
behaviour of merger and acquire concept which is equally important as other
available theories like structural break, de-trending etc. The main motivation
behind newly proposed merged autoregressive (M-AR) model is to study the
impact of merger in the parameters as well as in acquired series. First, we
recommend the estimation setup using popular classical least square
estimation and posterior distribution under Bayesian method with different
loss functions. Then, find Bayes factor, full Bayesian significance and credible
interval test to know the significance of the merger series. An empirical study
on merger in banking system is illustrated for more information about the
proposed model/ methodology.

Keywords
Autoregressive model; Break point; Merger & acquire series; Bayesian
inference

1. Introduction
Time series models are preferred to analyze and establish the functional
relationship considering it’s own dependence (Box and Jenkins (1970)) as well
as some other covariate(s)/ explanatory series which alike parallel influence
the series. However, these covariates may not survive for long run because of
merger with dependent series. Such type of functional relationship is not
explored by researchers yet but there are so many linear or non-linear models
proposed in time series to analysis in a distinctly circumstances see Chan and
Tong (1986), Haggan and Ozaki (1981), Chon and Cohen (1997). On the basis
of efficiency and accuracy, preferred time dependent model is chosen of
further analysis and doing forecasting. In daily real-life situations, we have a
time series which is recorded as a continuous process for every business and
organization. In present competitive market, all financial institutions feed upon
the growth of their business by utilizing the available information and follow
some basic business principles. But rate of consolidations has been increasing
tremendously to achieve the goal of higher profitability and widen business
horizon. For this, higher capability institutions have a significant impact
directly to weaker institutions. With the change on market strategies, some

87 | I S I W S C 2 0 1 9